BioMaxima's 1Q23 Results Fall Short of Expectations, Expansion and Development Initiatives in Progress
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The Company’s 1Q23 revenues at PLN 11.1 million were materially below our forecast at PLN 13.3 million. EBITDA, EBIT, and NI at PLN 1.0 million, PLN 0.5 million, and PLN 0.5 million, respectively, were lower than we expected, albeit nominal differences were small.
The results are not comparable yoy due to record high figures reported in 1Q22 when the Company’s results were supported by the agreement for a huge SARS-CoV-2 tests delivery. The low profitability observed in the last 3 quarters stems from the inflationary growth of costs which has not been reflected yet in the Company’s pricelists. 1Q23 EBITDA and EBIT margins grew qoq from 5% and 1% to 9% and 4%, respectively.
The Company’s 1Q23 operating cash flows were negative, at PLN -3.1 million, which resulted from a material growth of inventories coupled with lower trade liabilities. Net working capital increased from PLN 15.5 million at 2022-end to PLN 18.8 million. 1Q23 capex reached PLN 2.4 million in 1Q23 and net cash at the end of the discussed quarter fell to PLN 1.8 million from PLN 7.7 million at 2022-end.
Production capacity expansion
BioMaxima informed that the construction of a new production facility was completed and in a purchased building the warehouse and office space was adapted. The new building will house a production of the assortment related to antibiotic susceptibility testing (AST). The last stage of the production capacity BioMaxima expansion will be modernization of the existing building which should finish in 3Q23. We estimate this year’s total capex at over PLN 8 million.
Development works
BioMaxima has been working on the new technology to manufacture tests using blood and other body fluids and tests to be implemented in the industry. The Company has been developing their technologies in cooperation with the Medical This report is prepared for the Warsaw Stock Exchange SA within the framework of the Analytical Coverage Support Program 3.0.
Coverage Program Analytical WSE 3 BioMaxima University in Lublin and the Warsaw University; the latter and BioMaxima work on the creation of molecular tests to detect Salmonella spp. and Listeria spp. which are at the moment scarce on the diagnostic testing market.
Changes in forecasts
Following lower than expected 1Q23 financial results we cut slightly down our forecasts of the Company’s revenues and profits for this year and onwards. In the LT perspective we raise the EBITDA margin assuming that along with an increasing scale of BioMaxima’s operations it will draw near the level achieved by considerably bigger companies from the peer group (27-28%). We adjust the capex to the level currently expected and increase the net working capital expected at this year’s end given its material growth in 1Q23.
Our 12M valuation is negatively impacted by (i) peer multiples lowering and (ii) lower ST financial forecasts while (i) expected rise of margins in the LT perspective, (ii) 10Y PLGB yields decline, and (iii) valuation horizon shift in time have a positive impact. Ultimately, our 12M valuation of Biomaxima’s equities representing a 50%-50% mix of the outcomes of the DCF valuation and peer comparison (with a 10% discount) stays intact.
